NEW YORK (Reuters) - Gold fell more than 1 percent on Tuesday to just above $1,700 an ounce, hit by economic worries that also slammed equities and commodities and lifted the dollar.
Bullion, a traditional inflation hedge, broke below a key technical support - the 50-day moving average - as U.S. equities slid more than 1 percent on poor earnings from major multinationals, which fed fears of a global economic slowdown.
Other commodities .CRB also fell broadly as worries over the European economic crisis cut demand expectations. On Monday, Moody's downgraded five Spanish regions, citing their limited cash reserves and forthcoming bond repayments.
"Gold is behaving like every other risk asset today. The negative sentiment around the Moody's downgrades on Spain has peeled back all risk markets," said Jeffrey Sherman, commodities portfolio manager of DoubleLine Capital LP, which manages more than $45 billion in assets.
Spot gold was down 1.3 percent at $1,706.20 an ounce by 2:31 p.m. EDT (1831 GMT).
U.S. COMEX gold futures for December delivery settled down $16.90 at $1,709.40 an ounce, with trading volume about 20 percent below its 30-day average, preliminary Reuters data showed.
On gold options, uncertainty about the November 6 U.S. presidential election prompted investors to reduce bullish bets and guard against further losses, said independent COMEX gold options floor trader Jonathan Jossen.
Gold hit a 2012 high at $1,795.69 earlier this month but it has not broken above $1,800.
Silver fell 2.2 percent on Tuesday to $31.69 an ounce.
FED MEETING EYED
The Fed is due to issue its latest policy statement on Wednesday. Most economists expect the U.S. central bank to refrain from any additional easing ahead of the elections.
Market watchers said the economy appeared to be slowing despite the latest bond-buying by the Fed to boost growth.
"It feels like deflation is now back in, and the quantitative easing is not going to help out the economy," said Phillip Streible, senior commodities broker at futures brokerage R.J. O'Brien.
In its last policy meeting in September, the Fed tied its $40 billion-a-month bond-buying to U.S. jobs growth. While some recent data have been encouraging, the jobless rate remains at a relatively high 7.8 percent.
Signs of better physical demand, however, should limit further losses, analysts said.
In India, historically the world's largest bullion consumer, demand picked up as prices dipped ahead of a key festival season that is seen as an auspicious time to buy gold.
Gold-backed exchange-traded funds also posted an increase in holdings, with the bulk of those moving into the world's largest gold ETF, the SPDR Gold Trust
Platinum group metals also fell sharply on Tuesday, tracking copper's heavy losses.
Platinum was down 2.1 percent at $1,568.25 an ounce, while palladium dropped 4.3 percent to $592.72 an ounce after breaking below major technical support at its 100-day moving average.